Murphy Oil's Refineries on Sale

Murphy Oil Corporation (NYSE: MUR - News) has received an approval from its board of directors to sell its three refineries at Superior, Wisconsin; Meraux, Louisiana and Milford Haven, Wales as well as its retail system in the United Kingdom. The three refineries have a combined capacity of 280,000 barrels per day. The company expects the sale to complete in the first quarter of 2011.

Murphy Oil’s midstream and downstream businesses suffered losses in the past two quarters. The Refining and Marketing operations of the company incurred a loss of $29.7 million in first-quarter 2010 compared with a profit of $10.8 million in the first quarter of 2009. Murphy Oil suffered weaker refining margins and downtime for refinery makeovers in the U.S. and U.K during the quarter, leading to the dismal results.

During the first quarter conference call, Murphy Oil provided earnings per share guidance in the range of $1.15 to $1.25 for full year 2010. The Zacks Consensus Estimate for the second quarter of 2010 is $1.22 per share. The Zacks Consensus Estimates for fiscal 2010 and 2011 are respectively, $4.66 per share and $6.25 per share.

Based in El Dorado, Arkansas, Murphy Oil Corporation engages in the exploration, production, refining and marketing of oil and gas in the United States and the United Kingdom.

Murphy Oil possesses an excellent exploration and production profile. Its solid cash flow generation capability and cash balance support development projects. The company’s plans to exit loss-making businesses in order to focus solely on its more profitable businesses will augment results.

On the flip side, the company operates in a competitive environment and its future prospects could be affected if it does not successfully replace the crude oil and natural gas it produces with additional reserves. We maintain a “Neutral recommendation on Murphy Oil with the quantitative Zacks # 3 Rank (Hold) indicating no clear directional pressure on the shares over the near term.